4.11.57  Third Party Contacts

Manual Transmittal

January 17, 2014

Purpose

(1) This transmits revised IRM 4.11.57, Examining Officers Guide (EOG), Third Party Contacts.

Material Changes

(1) This is an editorial update. The update includes the following:

  1. IRM 4.11.57.1 (1)—Changed Embedded Quality Attribute 607 to 617.

  2. IRM 4.11.57.4.2.3 (6)—Added reference to IRM 25.4.1, Potentially Dangerous Taxpayer.

  3. Overall—Made minor editorial changes throughout this IRM to update website addresses, legal references, and IRM references. Made grammatical edits.

Effect on Other Documents

IRM 4.11.57 dated December 20, 2011, is superseded on the effective date of this IRM section.

Audience

Small Business and Self-Employed (SB/SE), Large Business and International (LB&I), Wage and Investment (W&I) and Tax Exempt and Government Entities (TE/GE) employees conducting tax return examinations.

Effective Date

(01-17-2014)

Bradley Bouton
Director, Examination Policy SE:S:E:EP
Small Business/Self-Employed

4.11.57.1  (01-17-2014)
References—Third Party Contacts

  1. References for third party contacts:

    • IRC 7602(c)—Notice of Contact of Third Parties.

    • Treas. Reg. 301.7602-2 (26 CFR 301.7602-2)—Third Party Contacts.

    • Title 31, Part 1 IRS; Privacy Act, Implementation (66 FR 48555)—The IRS has published a notice that exempts an Internal Revenue Service system of records entitled "Third Party Contact Reprisal Records-Treasury/IRS 00.334" from certain provisions of the Privacy Act.

    • IRM 1.2.52.13, Delegation Order 25-12 (Rev. 1) (formerly DO—259)—Third Party Jeopardy and Reprisal Determinations.

    • IRM 2.4.52—Command Codes TPCIN and TPCOL.

    • IRM 20.1.6.22—Third Party Contacts—IRC 7602(c).

    • Embedded Quality (EQ) Attribute 617—Taxpayer/Power of Attorney (TP/POA) Rights and Notification.

    • Letter 3164-C (DO)—(Coll-3-TDI) Third Party Contact Letter.

    • Letter 3164-N—Third Party Contact to Preparers.

    • Letter 3164-P (DO)—Third Party Notification for IRC 6700/6701 Investigations.

    • Form 12175—Third Party Contact Report Form.

    • Form 12180—Third Party Contact Authorization Form.

    • Publication (Pub) 1—Your Rights as a Taxpayer.

    • SB/SE Third Party Contacts website: http://mysbse.web.irs.gov/exam/tip/3rdparty/default.aspx

    • LB&I Third Party Contacts website—http://lmsb.irs.gov/hq/pqa/Post-filing/Third_Party_Contact.asp

4.11.57.2  (01-17-2014)
Definition of Third Party Contact

  1. For purposes of IRC 7602(c) a third party contact has been made when:

    1. An employee of the IRS contacts a person other than the taxpayer, and

    2. Asks questions about a specific taxpayer with respect to the determination or collection of that taxpayer’s tax liability.

  2. IRC 7602(c)(1), General Notice, prohibits the Service from contacting any person other than the taxpayer without giving the taxpayer "reasonable notice" prior to the contact.

  3. The intent behind this statute is to prevent the Service from disclosing to third parties that the taxpayer is the subject of a Service action without first providing reasonable notice to the taxpayer and allowing the taxpayer an opportunity to provide the information and resolve the matter.

  4. Treas. Regs. 301.7602-2 (26 CFR 301.7602-2) defines a third party contact as a communication which:

    1. Is initiated by an IRS employee,

    2. Is made with a person other than the taxpayer,

    3. Is made with respect to the determination or collection of a tax liability of such taxpayer,

    4. Discloses the taxpayer's identity, and

    5. Discloses the association of the IRS employee with the IRS.

4.11.57.3  (12-20-2011)
Contacts Not Considered Third Party Contacts

  1. Certain contacts are not considered third party contacts under IRC 7602(c) and therefore do not require prior notice or reporting on Form 12175. Listed below are several examples of contacts that are not considered third party contacts:

    1. Contacts with other IRS employees who are acting within the scope of their official duties, including employees of the Office of Chief Counsel.

    2. Contacts relating to a matter and issue being litigated.

      Note:

      The exception is not limited to Tax Court cases. The exception may apply to cases docketed in Bankruptcy Court, Federal District Court, or State Court. Most contacts with Department of Justice (DOJ) attorneys will not be IRC 7602(c) contacts because the contacts are made with respect to an issue and a matter that is in litigation. Contacts made with DOJ attorneys may be IRC 7602(c) contacts if the contacts are not made with respect to a matter and an issue in litigation and relate to the determination or collection of an identified taxpayer's liability.

    3. Obtaining information from a computer database which does not require any personal involvement on the other end, e.g., researching an asset locator or people locator database.

    4. When the taxpayer under investigation is a business, contacts made with employees who are acting within the scope of their employment during normal business hours on business premises. It is best to allow the taxpayer to identify employees authorized to speak on behalf of the taxpayer. The remaining employees are treated as third party contacts.

    5. A current employee, officer, or fiduciary of a taxpayer acting within the scope of his or her employment or relationship with the taxpayer.

    6. Contacts made for the purpose of obtaining information about an industry, market segment, or for an information gathering project where specific taxpayers have not yet been identified.

    7. Contacts made with a third party when the third party initiated the contact. For example, a mechanic who works at the business under examination initiates contact with the examiner and provides unsolicited information on cars he worked on in which the receipts were not entered on the taxpayer's books.

    8. Contacts made with any office of any local, state, federal, or foreign government, e.g., clerk of the court, county clerk, U. S. Postal Service, etc. See IRM 4.11.57.4.2.5, Governmental Entities.

    9. Contacts with return preparers who did not prepare the return but nevertheless are authorized via Form 8821, Tax Information Authorization, to receive information.

      Caution:

      If the examiner goes beyond providing information authorized by Form 8821 a Form 12175 must be completed.

    10. Contacts with individuals who have a valid power of attorney for the taxpayer.

    11. Contacts made by the IRS to respond to a request from a treaty partner for information concerning a taxpayer and a tax liability of the treaty partner.

    12. The dissemination of tax information via electronic format to other taxing jurisdictions, e.g., exchange of examination results via federal state agreements.

    13. If the identity of a taxpayer is not known (e.g., a taxpayer in a newspaper article with a common name, such as John Smith, charged with embezzlement), it would be impossible to provide such taxpayer with advance notice that the Service may contact third parties regarding the determination or collection of the taxpayer's liability. However, once the identity of the taxpayer is known (once the examiner contacts the police department about the embezzler and obtains an SSN and/or address), any contacts with persons other than the taxpayer regarding the determination or collection of the taxpayer's liability are subject to IRC 7602(c).

  2. Additional examples are provided in IRM 5.1.17, Third Party Contacts, and Treas. Regs. 301.7602-2.

    Note:

    The above list in not all inconclusive. When in doubt as to whether or not a contact constitutes a third party contact under IRC 7602, the examiner should discuss the situation with his or her Area Third Party Contact Coordinator. Exam Area Third Party Contact Coordinators are listed at http://mysbse.web.irs.gov/exam/tip/3rdparty/contacts/11899.aspx

    .

4.11.57.4  (12-20-2011)
Making a Third Party Contact

  1. Generally, contacts with third parties are made when the examiner is unable to obtain the information from the taxpayer or when it is necessary for the examiner to verify the information provided by the taxpayer.

  2. If it is necessary to contact a third party, IRC 7602(c) and Treas. Reg. 301.7602-2 impose three obligations on the Service regarding this contact:

    1. Provide advance notification to the taxpayer;

    2. Record each third party contacted; and

    3. Provide a list to the taxpayer of third parties contacted upon request.

4.11.57.4.1  (01-17-2014)
Advance Notification to the Taxpayer

  1. IRC 7602(c)(1) advises, "An officer or employee of the Internal Revenue Service may not contact any person other than the taxpayer with respect to the determination or collection of the tax liability of such taxpayer without providing reasonable notice in advance to the taxpayer that contacts with persons other than the taxpayer may be made."

  2. IRC 7602(c)(3), Exceptions, provides exceptions to the general advance notice as outlined in IRM 4.11.57.4.2, Exceptions to the Notice Requirements.

4.11.57.4.1.1  (12-20-2011)
Procedures for Providing Advance General Notice That Third Parties May Be Contacted

  1. In general, Pub 1 will be used to satisfy the advance general notice requirement that third parties may be contacted during the course of the examination. However, for preparers and promoters, Letter 3164-N, Third Party Contact to Preparers, and Letter 3164-P (DO), Third Party Notification for IRC 6700/6701 Investigations, will be used.

    Reminder:

    The following letters are no longer applicable because notice is given via Pub 1:
    Letter 3164-C (DO), (Coll-3-TDI) Third Party Contact Letter—used in situations involving non-filers within the jurisdiction of Examination,
    Letter 3164-E (DO)), (Exam-1) Third Party Contact Letter—generally used in Special Enforcement Program examinations,
    Letter 3164-F (DO), (Exam-2) Third Party Contact Letter—used if the third party contact would be made to verify information, or
    Letter 3164-G (DO), (Exam-3) Third Party Contact Letter—used if the third party contact would be made to obtain information.

4.11.57.4.1.1.1  (12-20-2011)
Providing Notification Using Publication 1

  1. Pub 1 is provided (mailed by regular mail or personally delivered) to the taxpayer at the time of initial contact and in advance of any third party contact being made. If the Pub 1 is mailed, the third party contact may not be made prior to 10 calendar days.

    Exception:

    Contact can be made earlier if the taxpayer confirms receipt of the mailed Pub 1.

  2. When initial contact with the taxpayer is made by telephone, Pub 1 is mailed to the taxpayer with the examination appointment confirmation letter. See IRM 4.10.2.7.4.1, Contacting the Taxpayer By Telephone.

  3. When initial contact with the taxpayer is made by mail, Pub 1 is mailed with the initial contact letter. See IRM 4.10.2.7.4.2, Contacting the Taxpayer by Letter.

  4. When the initial contact with the taxpayer is in person, Pub 1 must be provided at that time. See IRM 4.10.2.7.3, Making Initial Contact.

  5. For joint returns, the advance general notice of third party contact must be issued separately to each spouse.

  6. In cases with an authorized representative, the representative must be provided a copy of Pub 1.

  7. Providing Pub 1 as described above will serve to satisfy the advance general notice requirement for all tax periods included in the concurrent examination cycle (case) for the same taxpayer. Any tax periods for the same taxpayer which are subsequently examined but which are not part of the concurrent cycle (case) for which a Pub 1 has been issued, will require the re-issuance of Pub 1 to accomplish the advance general notice requirement.

  8. In the case of a decedent, notification should be given to the person who would normally receive a statutory notice if one were issued. See IRM 4.8.9.8.2.6, Fiduciary Relationship.

  9. Examiners must document the case file with the date and fact of mailing or personal delivery of the Pub 1 to the taxpayer. It is extremely important to document the fact that Pub 1 has been provided to the taxpayer in advance of any third party contact so the Service may demonstrate that the provisions of IRC 7602(c)(1) and other IRC provisions have been observed.

4.11.57.4.1.1.2  (01-17-2014)
Providing Notification Using Letter 3164-N or Letter 3164-P (DO)

  1. Preparers and/or promoters must be notified if third parties will be contacted in connection with the determination of penalties per IRC 6694, Understatement Due to Unreasonable Positions; IRC 6695, Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons; or IRC 6671, Rules for Application of Assessable Penalties. See IRM 20.1.6.22, Third Party Contacts—IRC 7602(c).

  2. Although IRC 7602(c) refers to the "determination or collection of the tax liability" of the taxpayer, IRC 6671 provides that preparer penalties and IRC 6700, Promoting Abusive Tax Shelters, Etc., promoter penalties are treated as taxes for all purposes of the Code.

  3. The following actions must be taken when making third party contacts on preparer or promoter cases:

    1. Send Letter 3164-N to each preparer;

    2. Send Letter 3164-P (DO) to each promoter;

    3. Allow the post office sufficient time to deliver the letter. Do not make any third party contacts until 10 days from the date Letter 3164-N or Letter 3164-P (DO) was mailed. If the letter is handed to the preparer or promoter, contacts may be made immediately.

    4. A copy of Letter 3164-N or Letter 3164-P (DO) must also be provided to the power of attorney.

  4. Document the case file with the date and method of delivery of Letter 3164-N or Letter 3164-P (DO).

  5. Letters in the 3164 series cannot be altered without approval from the Third Party Coordinator in Collection Policy.

    Note:

    For preparer and promoter cases, examiners may fulfill the IRC 7602(c) notification requirement by mailing Pub 1, and Letter 3164-N to preparers, or Letter 3164-P (DO) to promoters at the last known address. If the last known address has been identified as undeliverable, notification must still be sent to that address in advance of the third party contact. See IRC 6212(b), Address for Notice of Deficiency, and Treas. Reg. 301.6212-2, Definition of Last Known Address, for definition of last known address.

4.11.57.4.1.2  (12-20-2011)
Required Actions Prior to the Third Party Contact

  1. When it is determined that a third party contact is necessary, examiners must review the case file to verify whether the taxpayer has received the required notification (either Pub 1 or the appropriate Letter 3164) for all tax periods under examination. (The required general notice may have been issued by another employee or function.)

  2. If the taxpayer has not received prior notification for the year(s) under examination and a third party contact is necessary, the examiner must follow the notification rules. See IRM 4.11.57.4.1.1, Procedures for Providing Advance General Notice That Third Parties May Be Contacted.

4.11.57.4.2  (01-17-2014)
Exceptions to the Notice Requirements

  1. Treas. Regs. 301.7602–2(f), Exceptions, provides for seven exceptions to the notice requirements under IRC 7602(c).

4.11.57.4.2.1  (01-17-2014)
Authorized by Taxpayer

  1. IRC 7602(c) does not apply to any contacts that the taxpayer has authorized. See Treas. Reg. 301.7602–2(f)(1), Authorized by Taxpayer. Document the case file to reflect the date and method the taxpayer used to authorize the contact. Taxpayers may give oral authorization but the best practice is to complete the Form 12180, Third Party Contact Authorization Form.

  2. When Form 12180 is used, it must list the names of all third parties the taxpayer has authorized the IRS employee to contact. The form should be signed and dated. (For joint filing, both spouses must sign. If a POA or an authorized representative authorizes the third party contact(s), he or she must sign and date Form 12180.)

  3. The examiner must tell the taxpayer that the Service will not maintain or provide a record of the authorized contacts.

  4. The examiner should keep Form 12180 in the case file.

    Caution:

    IRC 7602(c) exempts from the notice requirements any third party contacts made by the Service of persons whom the Service believes, based on good cause shown, that the taxpayer may take reprisal action against if it is known that the Service has or may contact that person. See IRM 4.11.57.4.2.3. For that reason, the use of Form 12180 or an oral request for permission from the taxpayer to contact a third party should be used sparingly if the Service suspects the third party contact may fear reprisal.

4.11.57.4.2.2  (12-20-2011)
Collection Jeopardized

  1. IRC 7602(c) does not apply when the IRS employee making a contact has" good cause" to believe that providing the taxpayer with either a general pre-contact notice or a record of the specific person contacted may jeopardize the collection of any tax. For purposes of this section only, "good cause" includes a reasonable belief that providing the notice or record will lead to:

    1. Attempts by any person to conceal, remove, destroy, or alter records or assets that may be relevant to any tax examination or collection activity;

    2. Attempts by any person to prevent other persons, through intimidation, bribery, or collusion, from communicating any information that may be relevant to any tax examination or collection activity; or

    3. Attempts by any person to flee, or otherwise avoid testifying or producing records that may be relevant to any tax examination or collection activity.

    Example:

    A third party offers to tell the examiner the location of a buried safe containing cash or information regarding secret transfers of property to nominees.

    See Treas. Reg. 301.7602–2(f)(2), Jeopardy.

  2. If a jeopardy situation exists, the employee must take the following actions:

    1. Document the case file with specific information about the third party;

    2. Document the case file with the basis for the jeopardy determination; and

    3. Complete Form 12175, but do not forward it to the Third Party Contact Coordinator.

  3. When the jeopardy situation no longer exists, forward Form 12175 to the Third Party Contact Coordinator.

  4. Jeopardy may apply to any type of tax.

4.11.57.4.2.3  (01-17-2014)
Reprisal

  1. IRC 7602(c) does not apply when the IRS employee making a contact has good cause to believe that providing third party information to the taxpayer may subject any person to reprisal.

  2. Form 12175 will still be forwarded to the Area Third Party Contact Coordinator but will contain ONLY the following information:

    1. Block 1—Taxpayer TIN

    2. Block 2—Name control

    3. Block 3—Employee ID number (badge number), telephone number, and mail stop number

    4. Block 4—Secondary TIN (joint filing only)

    5. Block 5—Third Party Contact is for:

    6. Block 6—Date of contact

    7. Block 7—Check box

    8. Block 8—Name of Third Party—Enter the word "REPRISAL." Do not include third party information on Form 12175.

  3. The reprisal determination must be:

    1. Made on a case by case basis (no blanket determinations).

    2. Documented in the case file.

  4. In every third party contact, the employee must advise the third party before the conclusion of the interview that by law the IRS is required to provide his or her name to the taxpayer as a third party contact and ask if doing so may result in reprisal against any person.

  5. If any reprisal concerns exist, the employee will complete Form 12175 with only the information in IRM 4.11.57.4.2.3 (2) above.

    Caution:

    Care must be taken to ensure persons fearing reprisal information is not inadvertently disclosed. Therefore, information in the case file referencing the identity of the third party should be placed in a confidential envelope and clearly marked.

  6. An employee may be able to make the reprisal determination based on the case history,

    Note:

    A "potentially dangerous taxpayer" (PDT) indicator on a taxpayer's account does not automatically mean the third party contacted will be subject to reprisal. The examiner must evaluate the facts and circumstances in each case. See IRM 25.4.1, Potentially Dangerous Taxpayer, and IRM 5.1.17.8.4, Employee Determinations, for additional guidance.

  7. See Treas. Reg. 1.301.7602–2(f)(3), Reprisal.

4.11.57.4.2.4  (12-20-2011)
Pending Criminal Investigation

  1. IRC 7602(c) does not apply to any tax period pending a criminal investigation. Employees working a criminal investigation case are not required to provide the taxpayer with the advance notice or document the contacts on Form 12175.

  2. To be considered a "pending criminal investigation," a fraud referral must be reviewed by the fraud technical advisor, approved by management, forwarded to Criminal Investigation Division, and numbered as a criminal investigation.

    Caution:

    Contacts made to develop the referral are contacts under IRC 7602(c); the taxpayer must receive a Pub 1, or the appropriate Letter 3164 for preparer and promoter cases. See IRM 4.11.57.4.3. The third party contacts must be recorded on Form 12175 unless excepted by IRC 7602(c)(3)(A) or IRC 7602(c)(3)(B).

4.11.57.4.2.5  (01-17-2014)
Governmental Entities

  1. IRC 7602(c) does not apply to any contact with any office of any local, state, federal or foreign entity. IRC 7602(c) does not apply to the following:

    1. Contacts made with a county clerk to obtain lien information.

    2. Contacts made with a clerk of the court to obtain publicly available court records.

    3. Contacts made with state officials to obtain corporate charters or other publicly available information regarding corporate taxpayers or exempt organizations.

    4. Contacts made with the U.S. Postal Service to obtain the taxpayer's current address.

    5. Contacts made to respond to a request from a government of a foreign country. See IRM 5.1.17, Third Party Contacts.

    6. Unsolicited information received from a foreign country pursuant to an exchange of information clause within a tax convention between the United States and that foreign country.

    Exception:

    Contacts concerning the taxpayer's business with the government office contacted, such as the taxpayer's contracts with or employment by the office, are third party contacts.

4.11.57.4.2.6  (12-20-2011)
Non-Administrative Contacts

  1. IRC 7602(c) does not apply to contacts in the course of pending court proceedings. Three examples are provided in Treas. Regs. 301.7602–2(f)(7).

4.11.57.4.3  (12-20-2011)
Record Each Third Party Contacted

  1. Third party contacts made by the examiner must be documented on Form 12175, Third Party Contact Report Form, and will be forwarded to the Area Third Party Contact Coordinator when the third party contact has been made. Visit http://mysbse.web.irs.gov/exam/tip/3rdparty/contacts/11899.aspx for a listing of Third Party Coordinators.

  2. The examiner must ensure that accurate information is recorded on Form 12175, as this information is sent to the taxpayer with Letter 3173, Third Party Contacts, upon request. A copy of Form 12175 will be kept in the case file and Form 9984, Examining Officer's Activity Record, will be documented.

  3. The employee who makes the third party contact is responsible for complying with these provisions regardless of which function has control of the case.

  4. See IRM 4.11.57.4.2.3 regarding reprisal determinations.

4.11.57.4.4  (12-20-2011)
Documenting Third Party Contacts on Form 12175

  1. When a third party is contacted, generally, the examiner must document the contact using Form 12175. See exception below at IRM 4.11.57.5.1, Documentation of Contact Not Required. Instructions for completing Form 12175 are on page 2 of the form.

4.11.57.4.5  (01-17-2014)
Key Points to Remember

  1. Only one third party contact per Form 12175.

  2. Only one taxpayer identification number (TIN) per form.

  3. Provide a secondary TIN in a joint filing situation.

  4. Include appropriate third party contact identifying information.

    Note:

    The information provided in the "Third Party Contact Name" on Form 12175 is exactly what will be entered into the database and what the taxpayer will receive when they request a third party contact listing.

4.11.57.4.6  (12-20-2011)
Provide a List to the Taxpayer

  1. Upon request by the taxpayer, the Service will provide a list of all third parties contacted.

  2. A taxpayer may request a list of contacts at any time. The request may be oral or written.

    Note:

    A taxpayer may not make a blanket request to receive all future third party contacts.

  3. When a contact list is requested by a taxpayer, the employee receiving the request must take the following actions:

    1. Secure the taxpayer’s name, TIN, and mailing address (if different from Master File address);

    2. Advise the taxpayer that his or her list of third party contacts should be received by mail within 10 working days; and

    3. Refer the request to the Area Third Party Contact Coordinator. See the Third Party Contacts website for a listing of Area Third Party Contact Coordinators at http://mysbse.web.irs.gov/exam/tip/3rdparty/contacts/11899.aspx.

  4. The Area Third Party Contact Coordinator will research the request and prepare Letter 3173, including the taxpayer's list of third party contacts, and mail it to the taxpayer. See IRM 5.1.17.6, Area/Campus Third Party Contact Coordinator, for Area Third Party Contact Coordinator duties.

4.11.57.5  (12-20-2011)
Third Party Contact by Summons

  1. A summons issued to obtain third party information with respect to the determination or collection of tax is a third party contact.

4.11.57.5.1  (01-17-2014)
Documentation of Contact Not Required

  1. If the procedures for issuing a third party summons under IRC 7609, Special Procedures for Third-Party Summonses, are followed, the related third party contact is not required to be maintained in a record of contacts. Providing a copy of the third party summons to the taxpayer satisfies the post-contact recording, record maintenance, and reporting requirement of IRC 7602(c).

    Example:

    An IRS employee issues a summons to a third party with respect to the determination of a taxpayer’s liability and properly follows the procedures for such summonses under IRC 7609, which require that a copy of the summons be given to the taxpayer. This third party contact is not required to be maintained in a record of contacts available to the taxpayer.

4.11.57.6  (01-17-2014)
Special Situations

  1. The following are special third party contact situations that may occur during an examination.

4.11.57.6.1  (01-17-2014)
Contacts With an Officer or Employee of a Corporation

  1. Corporations can only act through their officers and employees. However, not all officers and employees may be authorized to act or speak on behalf of the corporation. If the officer or employee is authorized to act or speak on behalf of the taxpayer-corporation, then the contact is not with a "person other than the taxpayer." Make the initial contact through one of the principal corporate officers under IRC 6062, Signing of Corporation Returns, or as defined by local law (generally, the president, vice president, treasurer, or secretary).

  2. To avoid any disputes as to whether the contact was authorized, obtain written documentation that the contact was authorized. The best practice is to obtain a signed Form 12180 from the taxpayer or the POA.

  3. When it is unclear whether an employee is authorized to act or speak on behalf of the taxpayer-corporation, the contact should be treated as a third party contact, and Form 12175 completed.

    Caution:

    Prior to making a third party contact, the examiner must ensure the taxpayer has received a copy of Pub 1or the appropriate Letter 3164 for preparer penalty and promoter cases. The examiner may also obtain a Form 12180 to authorize a third party contact.

  4. In United States v. John Jillson, et al., 84 A.F.T.R.2d; the Court denied the government's motion to enforce IRS summonses issued to corporate officers because the IRS failed to notify the corporation/taxpayer (e.g., a notice-of-third-party-contact letter was not issued) before the officers were contacted.

  5. Contacts with officers and employees must occur within the scope of their employment with the corporation. However, if the examiner raises an issue in which information is needed regarding a shareholder's individual return, the officers/employees of the corporate taxpayer cannot be asked anything about this return or the examiner will have made a third party contact.

4.11.57.6.2  (12-20-2011)
Contacts With an Employee of a Sole Proprietorship

  1. Unless authorized by the taxpayer, contact with an employee of a sole proprietorship is a third party contact.

    Caution:

    Prior to making a third party contact, the examiner must ensure the taxpayer has received a copy of Pub 1 or the appropriate Letter 3164 for preparer penalty and promoter cases. The examiner may also obtain a Form 12180 to authorize a third party contact.

4.11.57.6.3  (01-17-2014)
Contacts With TEFRA Partnerships

  1. Notice Requirements: Reasonable notice of third party contacts should be provided to the tax matters partner (TMP).

    Note:

    If the Service is looking at transactions between the partnership and specific partners which will affect only their tax liability, then those specific partners should be provided advance notice of third party contacts relating to those transactions (Pub 1).

  2. Reportable Contacts: Contacts made with any partner of a TEFRA partnership are not third party contacts since they are considered contacts with the partnership. Contacts with persons other than partners or employees of the partnership acting within the scope of their employment remain reportable contacts.

    Note:

    Third party contacts that affect the separate liability of only specific partners should be recorded as third party contacts with respect to those particular partners.

4.11.57.6.4  (01-17-2014)
Contacts With Non-TEFRA Partnerships and S-Corporations

  1. Notice Requirements: the person(s) who should receive advance notice of third party contacts depends upon the type of entity being examined.

    1. If the examination is at the partnership/S-Corporation level, reasonable notice of third party contacts should be provided to the partnership or the S-Corporation (Pub 1).

    2. If the examination is conducted at the partner/shareholder level, reasonable notice of third party contacts should be provided to the particular partner/shareholder in addition to notification of the partnership/S-Corporation (Pub 1).

  2. Reportable Contacts: the individual(s) who may receive advance notice of third party contacts is dependent upon the type of entity examined.

    1. If the examination is at the partnership/S-Corporation level, contacts made with any partner/shareholder are not third party contacts as they are considered contacts with the partnership/S-Corporation or employees of the partnership/S-Corporation acting within the scope of their employment. Contacts with persons other than these individuals are reportable contacts.

    2. If the examination is conducted at the partner/shareholder level, contacts with any partner/shareholder, other than the particular partner/shareholder under exam, must be treated as third party contacts.

4.11.57.6.5  (01-17-2014)
Contacts With Informants

  1. It is the long-standing practice of the Service to protect the identity of a confidential informant to the fullest extent permitted by law.

  2. To the extent the IRS Whistleblower Office determines that an individual is a “whistleblower” under IRC 7623, Expenses of Detection of Underpayments and Fraud, Etc., such individual shall be deemed to be a confidential informant whose identity shall be protected in accordance with IRC 6103(h)(4), Disclosure in Judicial and Administrative Tax Proceedings. Any contact made between the IRS and the whistleblower will not be a third-party contact under IRC 7602(c).

  3. In any case that is not covered by the third-party contact exception in paragraph two above, if an informant approaches the IRS with information about a taxpayer, no third party contact has occurred. If an examiner or other IRS employee contacts the informant, IRC 7602(c) does not apply if the person making the contact has reason to believe that providing either the pre-contact notice or the record of the persons contacted would identify a confidential informant whose identity would be protected under IRC 6103(h)(4).

  4. In addition to the confidential informant exception noted above, the examiner should also inquire as to whether the informant may have reprisal concerns. If reprisal concerns exist, the examiner will advise the informant that his or her name will not be included on the list provided to the taxpayer.

  5. The examiner must determine on a case-by-case basis if an exemption described in either paragraphs three or four above are applicable.

  6. The confidential informant exception and the reprisal exceptions are independent exceptions to the third-party contact rules. Either, neither or both exceptions may apply to the Service’s contacts with an informant.

4.11.57.6.6  (01-17-2014)
Contacts by Telephone

  1. The list of procedures below provides instruction on how to respond under the given circumstances and assuming third party notification has not been provided to the taxpayer (Pub 1):

    • Third party leaves a message for the examiner to call them back—The examiner may return the call to the third party. This is not considered a third party contact under IRC 7602(c). The examiner may not ask questions about the specific taxpayer with respect to the determination or collection of a tax liability.

    • Examiner contacts directory assistance to obtain taxpayer's telephone number or address—The examiner may contact directory assistance to obtain a telephone number or address of the taxpayer as long as he or she does not identify that he or she is employed by the IRS or the purpose of the directory assistance call.

    • Examiner attempts to contact taxpayer but a third party answers the phone—The examiner may state his or her name and leave a message with his or her name and telephone number, but should not tell the third party that he or she is employed by the IRS unless specifically asked. The examiner may not ask the third party where the taxpayer works or where he or she may be contacted.

    • Examiner attempts to contact taxpayer but a third party answers the phone and asks the examiner to identify his or her employer—The examiner may answer the question and state that he or she works for the IRS. This is not a third party contact because the examiner is trying to contact the taxpayer rather than obtain information from the third party.

    • Examiner attempts to contact taxpayer but an answering machine picks up the call—The examiner should identify the taxpayer's name on the message, if it is considered necessary to get the message to the taxpayer, along with the examiner's name and telephone number. The examiner should not disclose that he or she is employed by the IRS.

4.11.57.7  (01-17-2014)
Impact of Third Party Contact Procedures on Case Building and Return Selection, Unlocatable Taxpayers, Congressional Inquiries

  1. Generally third parties should not be contacted prior to an examination, and generally examination decisions should be based on internal database information.

  2. While contacts with postal officials are not subject to IRC 7602(c) requirements, contacts with an employer and/or other third party, for the sole purpose of ascertaining a new address, are a third party contact.

  3. Responding to a congressional inquiry at the taxpayer's request is not an IRC 7602(c) contact. In this situation, the congressional representative is seeking information regarding a particular taxpayer in order to respond to the taxpayer's request for information or assistance.


More Internal Revenue Manual